“The topic of the possible transition of Ukraine to the euro in public discourse is almost not discussed-this is, as they say, “not on time.” However, now the case has become new after the statement of the Deputy Chairman of the National Bank of Ukraine Serhiy Nikolaychuk. In an interview, he reported that after the completion of the Economic Union, Ukraine would commit a commitment in the future”, – WRITE ON: ua.news
The topic of the possible transition of Ukraine to the euro in public discourse is almost not discussed-this is, as they say, “not on time.” However, now the case has become new after the statement of the Deputy Chairman of the National Bank of Ukraine Serhiy Nikolaychuk. IN interview He reported that after the completion of the Economic Union process, Ukraine would commit itself to abandon the hryvnia and switch to a common European currency, that is, the euro.
At the same time, the official warned: this path is long, complex, and it is unlikely to be implemented within 10-15 years. Moreover, in his opinion, even after this term, Ukraine will again evaluate whether it is worth getting rid of its own national currency.
According to the rules of the European Union, new members should join the euro area in the future. But in practice, the situation looks much more difficult: not all EU member states have made such a decision, and in many cases it was a conscious and politically reasoned braking.
How is the transition to the euro and why has some EU states still not done? What are the pros and cons of implementation of the euro for Ukraine? Is we worth planning such a step at all? Political observer Nikita Trachuk Together with the experts he dealt with the question.
The mechanism of transition to euro
The duty to switch to the euro fixed in Contract On the functioning of the European Union. New EU members should integrate into the euro area in the future. But there are many exceptions in this matter. These are countries that, for example, have agreed on the special or special status of their national currency – the same Denmark. Or the states in which the transition period has been delayed for decades and is unlikely to end.
In general, the procedure of transitioning the country to the euro is clearly regulated by EU documents. It includes several key stages.
First – This is an entry into the European Union. It is after the acquisition of full membership that the country undertakes to integrate into the European Monetary Union. Although there is an exception: Montenegro has introduced the euro more than 20 years ago, although it is not a member of the EU.
Second – joining the ERM II system, that is, the mechanism of exchange courses. For at least two years, the country must maintain a stable national currency rate to euros within fluctuations of up to 15%.
Third – fulfillment of the so -called “Maastricht criteria”. They include inflation control, budget deficit no more than 3% of GDP, public debt not higher than 60% of GDP, stable long -term interest rates, legal and institutional compatibility with the European Central Bank, etc.
Fourth And the last is to make a decision by the Council of the European Union and the European Central Bank on the country’s readiness for transition. After that, the country officially moves to the euro, starting to gradually remove the former national currency and replace it with pan -European.
It should be understood that this process can last for years. For example, neighboring Slovakia moved to the euro 5 years after joining the EU, Latvia – for 10. But at the same time Bulgaria, Romania, Hungary, Poland, Czech Republic, Denmark and Sweden (and until 2015 – Britain) still retain their national currencies. The reasons are in economics, politics, national identity and elementary pragmatism.
Basic arguments against the transition: loss of control over your own monetary policy, inability to devalue currency in order to support exports in the crisis period, risks of non-considering the specifics of the national economy by a single monetary policy, etc.
Another good reason to abandon the euro is the rise in prices after the transition. According to Eurostat, in many novice countries, consumer prices have increased by 10% or more during the year after the transition. This is very sensitive even for wealthy states, not to mention “Eurobidny” like Bulgaria.
Euro instead of hryvnia: benefits or losses?
Ukraine’s integration into the euro area causes contradictory opinions and evaluations. On the one hand, the transition to the euro can be considered an important step towards deepening European integration and economic stability. On the other hand, there is a real risk of loss of critical tools for Ukraine, especially in war, post -war recovery and chronic economic instability.
One of the main advantages of the transition to the euro is to reduce transactional costs in foreign trade, in particular with EU countries. To date, the European Union is a key trade partner of Ukraine, and foreign exchange transactions create additional costs for business and banking system. The single currency avoids the risks associated with currency fluctuations, simplifies business, facilitates investment planning and increases transparency of payments. In addition, the common currency is potentially capable of increasing confidence in the country’s banking system and facilitating stabilization of inflation expectations.
Another potential advantage of the euro is the symbolic and practical strengthening of European integration. The transition to a common currency will testify to trust from European institutions, compliance with macro -financial criteria and stability of economic policy.
However, the benefits of the euro are not unconditional. A critical factor is the loss of Ukraine’s possibility of pursuing its own monetary policy. In case of entry into the euro area, all decisions on the discount rate, inflationary target, money supply and foreign exchange interventions will be made by the European Central Bank. This means that Ukraine will lose its ability to regulate its exchange rate and interest rates in response to crises, financial shocks or payments fluctuations.
This threat is especially serious in the context of Ukraine’s status as an export -oriented economy. The flexible hryvnia exchange rate allows to maintain the price competitiveness of Ukrainian goods in foreign markets. In the event of the transition to the euro, such flexibility disappears – this has already proven examples of Greece and Portugal, which have lost their currency during the economic crisis of 2009-2011. As a result, they were forced to carry out painful internal cost reductions, which struck greatly on the income of the population.
It is equally important that the NBU as an institution will lose one of its key functions – the management of currency liquidity. In addition, in the context of Ukrainian reality – with distrust of banks, high levels of dollarization of the economy and poor control over the shadow market – the loss of the national currency issuer can be complicated Navigate financial stability in the transition period. It should also be borne in mind that the regulator in general receives excess from transactions with foreign exchange reserves and exchange rates. These funds go to the state budget, and their loss will require other sources.
The costs associated with the technical transition to the euro should be noted separately. Replacing currency inventories, ATMs, cash equipment, as well as printing new documents, staff training – all this will cost the state in hundreds of millions, if not billions of euros.
Thus, although the transition to the euro has some advantages – in particular, symbolic and geo -economic – for Ukraine it is rather a political slogan than a real strategic purpose. Any decision in this area should be made not for ideological reasons, but on the basis of a real analysis of macroeconomic risks, the goals of national development and the needs of the Ukrainian economy in flexibility and sovereignty.
Participation in the euro area is possible only after accession to the EU – the example of Montenegro is not relevant for us. Ukraine is not yet a member of the Union, and the introduction itself is not obvious in the near future. Despite the statement about the “European Future”, there is a significant skepticism in the EU itself about Ukraine’s real readiness for integration. Economic backwardness, weak institutions, corruption and war – all this inhibits the process.
Moreover, even if the entrance to the EU will take place over the next decade, the transition to the euro is a separate long-term transformation that can really last at least 10-15 years. Therefore, any discussions about the replacement of the hryvnia with the euro in the near future are purely hypothetical. In fact, it is a divination on the coffee grounds and nothing more.
Expert opinions
Economic expert Yuri Gavrilechko It is sharply negative about the possibility of switching from hryvnia to euro. He does not see any advantages for Ukraine.
“The purpose here can be only one – to finally consolidate the raw material base for the EU, destroying the remains of industry, education, science, etc. Since deprivation of the ability to emit its own currency means for the government of the country the loss of the most important lever of influence on the economy and it will remain only the most primitive industries. Agrarian state is what will be the result of such a policy. Without any prospects. And this is the National Bank – it’s even easier. Similar statements are information support for mythology: “Let’s do as in Europe and heal …”. That is, the usual PR traditional for the Ukrainian establishment of cargo culture and inferiority. Let me remind you that Poland, which has worse economic positions before Ukraine’s accession than Ukraine now, still retains its zloty and is that its own monetary policy demonstrates constant economic growth while maintaining a thorough argument for any negotiation process with Brussels, ” – said Yuri Gavrilechko.
Economist with 10 years of experience in NBU Vadim Orphan He also believes that the National Bank’s ideas are more like a PR. More: PR, which is already at the level of propaganda.
“PR is our everything. And an attempt to give a soothing pill to our society. In the early 1990s, Maastricht criteria were created to enter the euro area. For example, public debt is no more than 60% of GDP. In Ukraine, next year it will already exceed 100%. The second criterion is the state budget deficit no more than 3% of GDP. In Ukraine – 19.4%. I repeat: 19.4 percent! In inflation: +1.5% of the euro area. In Ukraine – 12%. But inflation in Ukraine is reminiscent of the weather in the smartphone: the temperature is one, but it is felt differently. What real inflation we have and what price rise – go to the store and see for yourself, ” The orphan says.
The expert reminds: 60-70% of Ukraine’s foreign trade is nominated in dollars. And the main trading partner we have China, at least in terms of import. But this is not yet a reason to switch to Yuan.
“The transition to the euro area is the loss of monetary sovereignty. Point. I will not comment on how effective it is. But monetary sovereignty is that we do not depend on decisions in Frankfurt, in ECB and so on … In general, all this is a PR actions, and is also completely detached from reality. But the potential role of the euro can grow in two factors: confiscation of Russian assets and increasing investments in EU recovery in the context of European integration. And in general, in the coming years – in bucks we trust », – confident Vadim Orphan.
Summarizing: Ukraine may undertake to switch to the euro in the event of accession to the EU. But in practice, such a transition is neither a compulsory period nor an alternative. Moreover, the experience of many EU Member States shows that a weighted macroeconomic policy often requires the preservation of national currency.
In conditions where Ukraine needs maximum control over its economy, when it runs war and fights for survival daily – discussing the prospects of the euro is secondary and far from reality. First of all, it is necessary to focus on economic stabilization, institutional reform and real integration into the European political space. And the currency question is a topic for another Ukraine, if it will ever be: stable, peaceful and confident in your tomorrow.